Sandra Flannigan, an analyst with Alex. Brown & Sons in Baltimore, said she was particularly pleased that the company showed a decline in non-performing assets - bad loans and foreclosed real estate.

First Union's stock, riding a surge of optimism, jumped $2.50 a share Wednesday to close at $33.25.

In Florida, First Union's non-performing assets decreased $19 million to $651 million. The company as a whole reported $1.2 billion in bad assets, a decrease of $62 million.

''If the economy does recover, as forecast, then it does seem that non-performing assets are peaking for a number of banks,'' Flannigan said.

Edward E. Crutchfield Jr., First Union's chairman, said, ''We are pleased by our results in view of the banking industry's difficult year. We made modest progress in earnings during 1991 and major progress in earnings potential.''

The biggest difference in First Union's performance was an improvement in the company's interest margins. Banks tend to become more profitable as interest rates fall because drops in rates affect deposits more than loans.

Byron Hodnett, First Union's chief executive in Florida, said the company has been able to keep most of Southeast Bank's deposits, despite aggressive advertising by competitors hoping to lure away Southeast customers disgruntled by rate changes and confusion caused by the takeover.

Hodnett said the company intentionally ran off jumbo certificates of deposit and CDs placed in the bank by brokers in exchange for a favorable interest rate. But that money, about $250 million, has been replaced with money from new customers and former Southeast customers who had left the bank before First Union took over.

He said an employee incentive campaign to call back former Southeast customers has resulted in $82 million being brought back to the bank.

First Union expects Southeast operations to add $62 million to the company's 1992 profit, Hodnett said.

Southeast branches across the state continue to operate under their old corporate name. Hodnett said Central Florida branches will be converted to First Union offices in June.